Amended Solar Bill Worries Small Solar Firms

Small solar companies argue that legislation aimed at promoting solar power could freeze them out of the market.

Without much fanfare, legislators this week gave final approval to an often-amended bill aimed at promoting the solar industry and enhancing the state’s efforts to reduce energy consumption.

But the bill (A-2529) is worrisome to many of the state’s small solar businesses, which focus on installing systems in residences and small companies. Specifically, they fear that a late amendment to the bill, agreed to a week ago, could undermine their efforts to compete in New Jersey’s fast-growing solar sector.

The amendment allows some huge solar farm proposals to move forward without review from the state Board of Public Utilities (BPU). That change, say the smaller firms, could allow the bigger projects to gobble up the bulk of solar renewable energy certificates (SRECs) available in any year.

If big projects gain most of the certificates, which are earned for the electricity that solar systems generate, the Mid-Atlantic Solar Energy Industries Association says it could be shut out of the market and the solar business. The association is a trade group of small solar firms. It also warns that if larger projects are allowed to proceed unchecked, it could collapse the overall SREC market, leaving homeowners and small businesses on the hook to pay off projects with their own money, instead of certificates.

Power in the Queue

There are more than 2,500 megawatts of proposed solar farm projects in the queue at PJM Interconnection, the operator of the regional power grid. While most experts say only a fraction, perhaps as few as 10 percent, of those projects will go forward they still could wind up grabbing a big share of the available SRECs.

In amending the bill, proponents, who included lobbyists representing large solar farm projects, argued it would be unfair to force them to have the BPU review a project after they had won approval from PJM. The amendment would exempt projects from review if they had already spent 5 percent of the projected cost by July 1, 2011 and had earned a federal grant.

The controversy over the bill renews an ongoing debate in the solar sector during the past few months. Administration officials and most solar businesses say it is in New Jersey’s best interest to have a diversified solar sector, comprised of both national solar corporations and smaller firms.

But the increasingly lucrative nature of the business, which features various subsidies, tax credits and depreciation allowances, has led to a flood of supersized solar farm projects. These, according to some observers, threaten to crowd out the smaller firms. Those concerns have been heightened by the state’s decision to end rebates for smaller solar projects. There now are more than 200 solar firms in New Jersey.

"We have a lot of concerns," said Lyle Rawlings, president of Advance Solar Products Inc., in Flemington, and president of the Mid-Atlantic association. "With the death of the rebate, we could jump into an SREC market if it had a structure carving out SRECs for smaller projects," he said.

Assemblyman Upendra Chivukula (D-Middlesex), the sponsor of the bill, said he doubted the likelihood that the big projects would swallow up all the SRECs. He said there are two checks preventing that from happening. The first is that the projects need to qualify for the federal grant credit and the other is that they have to get through the PJM process, which takes months, if not years, to complete.

Dennis Wilson of Renewable Power Inc. in Whippany, disagreed, saying the amendment will allow virtually all large-scale projects to advance. "You’re going to see a huge number of 10- and 20-megawatt projects rush ahead this year," he said, adding that it could collapse the price of solar certificates. "What if you cannot sell them? Who is going to buy them?"

Aggressive Targets

That prospect was downplayed by Division of Rate Counsel Stefanie Brand, who said she is not worried about the market for solar certificates. Brand and others say the better New Jersey does in meeting aggressive solar targets, the more likely the price of SRECs will fall, making solar more competitive with traditional forms of power generation.

Still, Brand has problems with the bill because it has been changed so many times, she believes it creates a too convoluted system for solar developers to navigate. "It is creating such a complicated maze it will be hard for people to understand what rules apply to them," Brand said.

The bill’s main objective originally was to address a problem created by the fact that New Jersey’s four electric utilities all had different definitions for what constituted a distribution system. The issue is critical because only solar systems that hook up to distribution systems qualify for solar certificates.

The problem is especially acute in South Jersey, where a huge number of solar farms have been proposed, so many that the utility there, Atlantic City Electric, has been telling developers they cannot hook up to its power grid.

In a letter to Gov. Chris Christie urging him to conditionally veto the bill, the association noted the reservation of substation capacity by large solar farms is already preventing residential and commercial solar customers in the utility’s territory from connecting solar systems to the local electric grid.